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Monday, November 09, 2009

CIB Sees Surplus But Will Still Borrow $27 Million From State

Earlier today, the IBJ's Scott Olson posted a story online bringing news of a potential surplus for the CIB in its 2010 budget. Olson wrote:

Approaching the end of 2009, Indianapolis' cash-strapped Capital Improvement Board is on much more solid financial footing than it was at this time last year.

The not-for-profit is on target in 2010 to turn a $47 million budget deficit into a surplus—additional money that could be used in negotiations with the Indiana Pacers over ConsecoFieldhouse operating costs.

The CIB, which will discuss its financial situation when it meets Monday afternoon, expects to improve its finances by making $26 million in cuts this year. It also avoided $25.5 million in debt-service reserve payments and is poised to collect roughly $11 million more in annual revenue.

Yet, it’s still unclear whether the CIB, which operates the city’s professional sports venues as well as the Indianapolis Convention Center, will absorb $15 million next year in fieldhouse operating costs.

Within a few hours of his earlier online story, Olson posted a second story declaring that the CIB will likely take out a $27 million loan from the state it was authorized under a tax, spend and borrow bailout scheme approved by the legislature and the City-County Council earlier this year. Olson writes:

The Indianapolis Capital Improvement board likely will accept a state loan providing $27 million over three years to help shore up its fragile financial situation.

Members of the not-for-profit that operates the city’s professional sports venues and the Indianapolis Convention Center will vote next month on whether to accept the assistance, or risk losing the initial $9 million installment this year.

Lathrop last month hinted that the organization’s bleak financial situation had improved to the point that it may not need the initial $9 million, which would save the CIB from paying 5.25 percent in interest charges.

The not-for-profit is on target in 2010 to turn a $47 million budget deficit into a surplus—additional money that could be used in negotiations with the Indiana Pacers over ConsecoFieldhouse operating costs.

Obviously, someone forgot to tell Lathrop earlier today that the state loan is needed to give the billionaire Simons their $15 million a year subsidy that they are demanding simply because they can. It's also further confirmation of just how much the CIB leadership has lied to the public about its finances. Remember, this discussion began with the CIB claiming last year it would need to find another $20 million a year to pay for the additional operating costs for Lucas Oil Stadium, which it failed to budget before agreeing to the massive public works project. By early this year, that number grew considerably. At times the CIB said it needed anywhere between $30 to $50 million more to cover a budget shortfall. The CIB then went on a well-publicized campaign to demonstrate that it was undertaking budget cuts. As I pointed out at the time, most of the cuts were fake budget cuts. The CIB got a 20% increase in its budget last year, more than it actually needed and then tallied a number of reductions as cuts when it later rolled the numbers back to where they should have been originally.

The Indiana legislature and City-County Council were hoodwinked into hiking taxes and paying out additional subsidies to the CIB to the tune of tens of millions annually, along with a $27 million state loan. During that debate, CIB officials lied and said they would have to make a $25.5 million debt service reserve payment in September. As it turns out, the CIB did not have to make that payment and is actually sitting on a cash reserve of $22 million. The Mayor and the City-County Council have now created a task force made up of persons who naturally want to give the billionaire Simons another $15 million a year of your taxpayer dollars because the more than $400 million our local government has shelled out to the Simon family in public subsidies over the years just won't cut it. Besides, everyone on the task force accepts free tickets to the Pacers games. How cheaply our politicians can be bought these days.

Understand this, the CIB is under NO LEGAL OBLIGATION to give a $15 million a year subsidy to the Simons. The Simons, quite the greedy negotiators they are, got exactly the deal they wanted when Conseco Fieldhouse was built a decade ago. The Simons became infuriated when Jimmy "The Pill Popper" Irsay managed to get a better deal from the CIB for Lucas Oil Stadium. They immediately put out word that they expected a similar deal from the CIB. They even went out and hired Jim "Rent-A-Civic Leader" Morris to cut the deal. Remember, he's the guy who helped convince your city leaders to pay more than double what the water company was worth and then he walked off with a $6 million golden parachute agreement. Of course, you were left holding the bag to pay for that fiasco with a nearly 100% increase in your water rates. If the CIB says no to the Simons and they choose to break the lease, the Simons are obligated to pay us at least $50 million and perhaps more than $100 million under the terms of the lease. When Pat Early tells you otherwise, he is not talking straight to you. And when the Star begins writing more editorials like it did today saying the Pacers are just too important to lose, remember that the newspaper is only interested in its own financial interest in having an NBA franchise in town to cover and could give a damn less about the financial impact on your wallets.

There are actually two penalty clauses in the Pacers contract. You take the one that provides for the lowest penalty. The penalty drops a little each year.

Even by the most conservative estimations, the penalty the first year is a whole lot more than $50 million. I did a scenario on my blog which showed that the 11th year penalty would be in the ballpark of $165 million. I think the IBJ came out with the $50 million number awhile back. I don't think their reporter really closely examined the penalty provision and how it worked.

Wait a second...don't they have to run over to the council before they do anything with that money? Wasn't part of the bailout that the CIB goes to the CCC before adding any more obligations to their budget?

The Star is part of a group of 'civic-minded organizations' that still have a loan to the CIB awaiting payment. $33.8 million was the amount at the end of 2007, accumulating unpaid interest as we speak, and due at the end of 2017.

I think the Council dropped its request that they have a final say in any future contractual obligations of the CIB. And the final impression I got is that the Councillors, by and large, feel more money should be sent to the CIB, only it should come from either the State or the donut Counties. So, while this CIB crew may be trying to commit the City to a new Pacers contract for Conseco Fieldhouse before all of their seats on the CIB are cancelled, there is much support for this to be the ultimate outcome anyway.

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